Sprint - Nextel 2005 Annual Report Download - page 75

Other increases in nonoperating income during 2005 included favorable foreign exchange rates used in foreign
currency transactions and favorable terms in certain customer contracts. During 2004, we realized losses due to
unfavorable foreign exchange transactions and charges of $15 million in advisory fees related to the
recombination of our tracking stocks. During 2003, we recorded a $50 million charge, net of insurance
settlements, to settle shareholder litigation. We also incurred losses related to foreign exchange transactions.
Income Tax (Provision) Benefit
Our consolidated effective tax rates were 38.0% in 2005, 36.9% in 2004, and 42.1% in 2003. Information
regarding the differences that caused the effective income tax rates to vary from the statutory federal rate for
income taxes related to continuing operations can be found in note 13 of the Notes to the Consolidated Financial
Statements appearing at the end of this annual report on Form 10-K.
Discontinued Operations, net
In 2003, we completed the sale of our directory publishing business to R.H. Donnelley for $2.2 billion in cash.
The pretax gain was $2.1 billion.
Financial Condition
Our consolidated assets of $102.6 billion as of December 31, 2005 reflect an increase of $61.3 billion from 2004.
This increase was primarily due to business combination activity, $56.4 billion of which reflects the fair value of
Nextel’s assets, net of cash paid, and $555 million of which reflects the fair value of US Unwired’s assets, net of
cash paid, both of which were acquired in the third quarter 2005, $93 million of which reflects the fair value of
Gulf Coast Wireless’ assets, net of cash paid, and $239 million of which reflects the fair value of IWO Holding’s
assets, net of cash paid, both of which were acquired in fourth quarter 2005. Additional information regarding the
impact of business combinations on consolidated assets can be found in note 2 of the Notes to the Consolidated
Financial Statements appearing at the end of this annual report on Form 10-K. The remainder of the increase in
consolidated assets is primarily driven by cash and equivalents. Excluding net cash paid of $188 million in the
Sprint-Nextel merger and the acquisitions of US Unwired, Gulf Coast Wireless and IWO Holdings, cash and
equivalents increased $4.9 billion. See “Liquidity and Capital Resources” for additional information on the
increase in cash.
In August 2005, all three major credit rating agencies upgraded our debt ratings. Standard and Poor’s Corporate
Ratings upgraded our long-term senior unsecured debt to A- from BBB- and changed our credit rating outlook to
stable from positive. Moody’s Investor Service upgraded our long-term senior unsecured debt rating to Baa2
from Baa3 and changed the credit rating outlook to stable from positive. Fitch Ratings upgraded our senior
unsecured debt rating to BBB+ from BBB and changed our credit rating outlook to stable from positive.
Liquidity and Capital Resources
Year Ended
December 31,
Change From
Previous Year
2005 2004
(dollars in billions)
Cash and equivalents ............................................. $ 8.9 $ 4.2 $ 4.7
Marketable securities ............................................. 1.8 0.4 1.4
10.7 4.6 6.1
Undrawn bank credit facility ....................................... 4.5 1.0 3.5
Undrawn and available accounts receivable asset securitization facilities .... — 0.7 (0.7)
Total liquidity ................................................. $ 15.2 $ 6.3 $ 8.9
During December 2005, we entered into a new unsecured bank credit facility, consisting of a five year $6.0
billion revolving credit facility and a 364-day $3.2 billion term loan, for a total financing capacity of $9.2 billion.
64